A discount does not come out of the price. It comes out of the profit, which is a much smaller number. Put in your own figures to see what you give away and how much extra work you would have to win just to stand still. Free, and no signup needed.
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If two or more sound familiar, the discount is probably costing more than the work it wins. The calculator below puts a number on it.
These boxes are filled in with an example job, not a real one. Replace each number with your own.
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The number you knock off comes from the price, but it is taken out of the profit, and the profit is a much smaller number. That is the whole problem in one sentence.
Take a $2,000 job that costs you $1,300 to do. Your profit is $700, which is a healthy 35% margin. Knock 10% off and the client saves $200. You do not lose 10%, you lose $200 of $700, which is nearly a third of what the job was worth to you. To earn the same money on the discounted price you would need to win 40% more work.
The thinner your margin, the worse the arithmetic gets. On a 20% margin, a 10% discount halves your profit and you need to double your workload to stand still.
At least half of small businesses charge no more for their regular items than they did 18 months earlier: the typical price change is 0%.
Source: Billbooks invoice data, 8,483 invoices from 112 small businesses, September 2024 to September 2026 (aggregate only, figures shown only where 25+ businesses contribute).
That is the background against which most discounts are given. Prices that have not moved in a year and a half are already losing ground to your own costs, and a discount on top of a flat price is a second cut in the same direction.
Discounts also tend not to stay one-off. A client who got 10% once opens the next conversation from the discounted price, so the discount quietly becomes your new rate for that client, and the cost is not one job, it is every job after it.
This is the figure nobody works out before agreeing. It only depends on two things: your margin and the size of the discount.
| Your margin | 5% discount | 10% discount | 20% discount |
|---|---|---|---|
| 20% | +33% work | +100% work | Never breaks even |
| 30% | +20% work | +50% work | +200% work |
| 40% | +14% work | +33% work | +100% work |
| 50% | +11% work | +25% work | +67% work |
Read the 20% margin row again. A 20% discount on a 20% margin means you are working for nothing, and anything beyond it means you are paying for the privilege of doing the job.
Profit is what you charge minus what the job costs you. The discount comes straight off the profit, because your costs do not fall when your price does.
profit = price - cost
profit after = (price - discount) - cost
extra work needed = discount / (profit - discount)
The last line is the one that surprises people. If the discount is as large as your profit, the bottom of that fraction is zero and no amount of extra work ever covers it. The calculator says so plainly rather than printing an enormous number.
A client who asks for a discount is usually asking for something else: certainty, a smaller bill this month, or a reason to believe the price is fair. Each of those has a cheaper answer than money.
Do not try to fix every client at once. Raise your rate with new clients first, where it costs you nothing, and let the discounted ones catch up at renewal. Work out what the discount has actually cost you over the last year before you decide how fast to move, because the number is usually the argument.
If the discount is only one part of the problem, the hourly rate calculator works out what you need to charge to cover your costs and pay yourself properly.
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